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Tuesday, July 6, 2010

CYCLE BOTTOM?

I've been waiting for a swing low to mark the daily cycle bottom and likely the intermediate cycle low also.

As long as we close positive today we will have that swing. (We will also have a four day rule possible trend change) I think there's a very high probability that Thursday marked the bottom.

Folks this is just how intermediate cycle bottoms unfold. They always make everyone believe the decline will continue forever. They always bring out the calls for a crash. And they always bring out the trolls on this blog :)

The thing is they also always eventually bottom. Then the market rallies long enough to reverse sentiment back to bullish extremes. In bull markets that means new highs. In bear markets the fundamentals pull the market back down before new highs can be made.

Once I become convinced we have indeed put in the intermediate cycle low (a pretty good tell is when the bears start blaming the rally on the PPT. A sure sign they got caught short at the bottom) then the bounce out of that low will tell us whether we are back in a bear market, or whether this has just been a correction in a cyclical bull.

If the market rolls over and moves below the intermediate low (which appears to be at 1014 if the swing holds) then yes the markets are back in bear mode. If we go back up and make new highs...well that would be obvious now wouldn't it?

So the next month or two should tell us the true direction of the market.

50 comments:

You have to be a fool not to know where this market is headed. Gold to 1000 and the dow will slowly grind lower. Sure a little pop for a couple of days but will be heavily sold into. Welcome to the world of deflation.

Gary-Hope AGQ works out for all of us.What is your best guess in days for this possible stock market rally-- (Given worst case scenario if it eventually rolls over before reaching new highs and falls to new lows??)

Has silver bottomed? Not sure, let me go down into my basement and dust off the time machine and i'll let you know by COB tomorrow. Seriously you need to reconsider your investment stratergy if it consists of seeking random confirmations on a blog! Actually just put all your money in silver now.

Depends on if you are a trader or an investor. An investor rides the bull till the fundamentals change.

They haven't changed BTW.

It also depends on your goals. If you just want to try and eke out a little profit then use stops and trade.

If you want to get rich off a secular bull then you have to be willing to do what's neccessary to make the big bucks. That means holding on to positions during corrections and in fact seeing the correction for what it is, an opportunity to accumulate at cheaper prices.

You have to think like a value investor though, and realize you aren't going to time the exact bottom but you are buying on sale, even if it's not the exact bottom of the sale.

Like I said these intermediate cycle bottoms always make everyone think they will go on forever, but they never do and that includes gold.

Sure I gotta a time machine and it's saying silver will be 3 dollars at some point in the future. Now that don't mean you shouldn't back the truck up on this baby as I didn't say what happens in between! Guru boy

John Hussman likes PMs, but believes there will be short term pain in the sector before the longer term trend possibly resumes.

"The most notable shift for us was in precious metals last week, where we took some profits and pared our exposure back toward 5% of assets. That is a position we can carry even if commodity prices collapse on deflation concerns, but it leaves us with a conservative exposure in the event that the recent market enthusiasm for precious metals continues a while longer. Again, I don't think the long-term thesis for precious metals is wrong, but near-term concerns of investors are more likely to involve deflation, which may make for some serious discomfort for precious metals investors. This may include potential liquidation pressure from hedge funds, which are not known for maintaining long-term theses well."

Near term is certainly cloudy. On one hand gold may (and probably is) working it's way into an intermediate cycle low. On the other hand the daily cycle is becoming very stretched and the dollar is collapsing.

A collapsing dollar has driven every C-wave for the last 9 years.

I certainly wouldn't buy front month options by any means but then again I certainly wouldn't panic out of the sector especially if it means locking in losses.

Just checking in after the holiday, and not too surprised or too happy that gold is lower even if I expected more downside after the recent action.

That said, today offers me up the best case scenario to ADD to DGP (still up 17% thanks to Gary), and start buying the miners (NG, GDXJ, and maybe SVM) I've been patiently waiting for. Down open in gold can be bought today.

Since most think we're headed into, or already in the Greatest Depression and I agree, I'd suggest taking a peek at Homestake Mining and Doming Mining AFTER the 1929 stock decline. I don't expect miners will again get anywhere near the lows of late '08, just as they didn't revisit lows after 1929.

Getting long miners today, then going on a long vacation only to check in once per day at most, probably even less.

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